SOURCE: Quicksilver Gas Services LP

Quicksilver Gas Services LP

November 09, 2009 07:30 ET

Quicksilver Gas Services' Third-Quarter Income Jumps 35% in 2009

FORT WORTH, TX--(Marketwire - November 9, 2009) - Quicksilver Gas Services LP (NYSE: KGS) today reported net income for the third quarter of 2009 of $8.7 million, up approximately 35% from $6.4 million reported in the prior-year period. Earnings before interest, income taxes, depreciation and accretion ("EBITDA"), a non-GAAP measure, was $16.9 million for the third quarter of 2009, an increase of 29% from the 2008 third-quarter EBITDA of $13.1 million.

Third-Quarter 2009 Highlights

--  Increased average gathered volumes to approximately 234 MMcf per day;
    up 10% versus the prior-year quarter
--  Increased distributable cash flow to $13.4 million; up 16% year-over-
    year
--  Connected approximately three miles of gathering infrastructure
--  Connected five new wells to the gathering system
    

"Quicksilver Gas Services continues to grow by all measures and is increasing liquidity in order to capitalize on opportunities created by the current macro-economic environment," said Toby Darden, Quicksilver Gas Services' president and chief executive officer. "We look forward to more growth in 2010, enhanced by acquisitions. Our fee-based revenue strategy and cost-efficient operating structure continue to pay dividends for both our unitholders and for our producer-customers."

Capital Program

For the third quarter of 2009, the company incurred approximately $3.7 million of capital costs, including $2.5 million of maintenance capital. Expenditures during the quarter included the connection of approximately three miles of gathering lines and five new wells to the gathering system.

Debt and Liquidity

The company's total borrowing capacity under its senior secured revolving credit facility was increased to $320 million in October. The company currently has approximately $203 million drawn on its senior secured credit facility resulting in approximately $117 million of available capacity.

Distributions

On October 19, 2009, the company announced a cash distribution for the 2009 third quarter of $.39 per unit, a 5.4% increase from the previous quarterly rate. For the three months ended September 30, 2009, distributable cash flow, a non-GAAP financial measure, totaled $13.4 million, which provided 1.38 times the amount required to cover the total distributions to both the limited and general partners for the period.

Conference Call

Quicksilver Gas Services will host a conference call for investors and analysts at 10:00 a.m. eastern time today to discuss the third-quarter 2009 operating and financial results and its outlook for the future. The company invites interested parties to listen to the call via the company's website at www.kgslp.com or by calling 1-877-313-7932, using the conference ID number 80360996, approximately 10 minutes prior to the call. A digital replay of the conference call will be available at 3:00 p.m. eastern time today and will remain available for 30 days. The replay can be accessed at 1-800-642-1687 using the conference ID number 80360996. The replay will also be archived for 30 days on the company's website.

Use of Non-GAAP Financial Measures

This press release and the accompanying schedules include the non-generally accepted accounting principles ("non-GAAP") financial measures of EBITDA, adjusted gross margin and distributable cash flow. The accompanying schedules on page 7 of this news release provide reconciliations of these non-GAAP financial measures to their most directly comparable financial measures calculated and presented in accordance with accounting principles generally accepted in the United States of America ("GAAP"). Our non-GAAP financial measures should not be considered as alternatives to GAAP measures such as net income or operating income or any other GAAP measure of liquidity or financial performance.

About Quicksilver Gas Services

Fort Worth, Texas-based Quicksilver Gas Services is a growth-oriented limited partnership in the business of gathering and processing natural gas produced from the Barnett Shale geologic formation in the Fort Worth Basin of north Texas. The company began operation in 2004 to provide these services to Quicksilver Resources Inc., which owns our general partner. For more information about Quicksilver Gas Services, visit www.kgslp.com.

Forward-Looking Statements

The statements in this news release regarding future events, occurrences, circumstances, activities, performance, outcomes and results are forward-looking statements. Although these statements reflect the current views, assumptions and expectations of Quicksilver Gas Services LP's management, the matters addressed herein are subject to numerous risks and uncertainties, which could cause actual activities, performance, outcomes and results to differ materially from those indicated. Factors that could result in such differences or otherwise materially affect Quicksilver Gas Services LP's financial condition, results of operations and cash flows include: changes in general economic conditions; fluctuations in natural gas prices; failure or delays in Quicksilver Resources Inc. and third parties achieving expected production from natural gas projects; competitive conditions in our industry; actions taken or non-performance by third parties, including suppliers, contractors, operators, processors, transporters and customers; fluctuations in the value of certain of our assets and liabilities; changes in the availability and cost of capital; operating hazards, natural disasters, weather-related delays, casualty losses and other matters beyond our control; construction costs or capital expenditures exceeding estimated or budgeted amounts; the effects of existing and future laws and governmental regulations; and the effects of current and future litigation; as well as other factors disclosed in Quicksilver Gas Services LP's filings with the Securities and Exchange Commission. The forward-looking statements included in this press release are made only as of the date of this press release, and we undertake no obligation to update any of these forward-looking statements to reflect subsequent events or circumstances except to the extent required by applicable law.

                      QUICKSILVER GAS SERVICES LP
                CONDENSED CONSOLIDATED STATEMENTS OF INCOME
            In thousands, except for per unit data - Unaudited


                                 Three Months Ended     Nine Months Ended
                                    September 30,         September 30,
                                --------------------- ---------------------
                                   2009       2008       2009       2008
                                ---------- ---------- ---------- ----------
Revenue
  Gathering and transportation
   revenue - Quicksilver        $   14,542 $    8,674 $   42,708 $   22,350
  Gathering and transportation
   revenue                             615      1,553      2,259      4,006
  Gas processing revenue -
   Quicksilver                       8,155      7,345     25,541     21,866
  Gas processing revenue               295      1,507      1,344      3,797
  Other revenue - Quicksilver          691        225      1,141        675
                                ---------- ---------- ---------- ----------
     Total revenue                  24,298     19,304     72,993     52,694
                                ---------- ---------- ---------- ----------

Expenses
  Operations and maintenance         5,694      4,772     17,108     15,034
  General and administrative         1,733      1,473      5,463      4,712
  Depreciation and accretion         5,745      3,866     16,554     10,429
                                ---------- ---------- ---------- ----------
     Total expenses                 13,172     10,111     39,125     30,175
                                ---------- ---------- ---------- ----------

Operating income                    11,126      9,193     33,868     22,519

Other income                             -          4          1         10
Interest expense                     2,238      2,703      7,924      7,542
                                ---------- ---------- ---------- ----------

Income before income taxes           8,888      6,494     25,945     14,987

Income tax provision                   235        106        446        109
                                ---------- ---------- ---------- ----------

Net income                      $    8,653 $    6,388 $   25,499 $   14,878
                                ========== ========== ========== ==========

 General partner interest in
  net income                    $      382 $      137 $      886 $      314
 Common and subordinated
  unitholders' interest in net
  income                             8,271      6,251     24,613     14,564
 Earnings per common and
  subordinated unit:
   Basic                        $     0.35 $     0.26 $     1.03 $     0.61
   Diluted                            0.31       0.26       0.92       0.61
 Weighted average number of
  common and subordinated units
  outstanding:
   Basic                            23,827     23,783     23,827     23,783
   Diluted                          27,981     26,829     28,319     23,924





                        QUICKSILVER GAS SERVICES LP
                  CONDENSED CONSOLIDATED BALANCE SHEETS
              In thousands, except for unit data - Unaudited


                                                September 30, December 31,
                                                    2009          2008
                                                ------------- ------------
                  ASSETS
Current assets
  Cash and cash equivalents                     $         548 $        303
  Accounts receivable                                     528        2,082
  Accounts receivable from Quicksilver                  5,066            -
  Prepaid expenses and other current assets               348          594
                                                ------------- ------------
      Total current assets                              6,490        2,979

Property, plant and equipment, net                    455,661      488,120
Other assets                                            1,635        1,916
                                                ------------- ------------
                                                $     463,786 $    493,015
                                                ============= ============

        LIABILITIES AND PARTNERS' CAPITAL
Current liabilities
  Current maturities of debt                    $       2,200 $      1,375
  Accounts payable to Quicksilver                           -       10,502
  Accrued additions to property, plant and
   equipment                                            3,335       17,433
  Accounts payable and other                            4,706        1,930
                                                ------------- ------------
      Total current liabilities                        10,241       31,240

Long-term debt                                        206,900      174,900
Note payable to Quicksilver                            52,966       52,271
Repurchase obligations to Quicksilver                  67,236      123,298
Asset retirement obligations                            8,639        5,234
Deferred income tax liability                             815          369

Partners' capital
  Common unitholders (12,313,451 and 12,269,714
   units issued and outstanding at September 30,
   2009 and December 31, 2008, respectively)          114,256      108,036
  Subordinated unitholders (11,513,625 units
   issued and outstanding at September 30,
   2009 and December 31, 2008)                          2,351       (2,328)
  General partner                                         382           (5)
                                                ------------- ------------
      Total partners' capital                         116,989      105,703
                                                ------------- ------------
                                                $     463,786 $    493,015
                                                ============= ============




                        QUICKSILVER GAS SERVICES LP
              CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                         In thousands - Unaudited


                                                    Nine Months Ended
                                                      September 30,
                                                --------------------------
                                                    2009          2008
                                                ------------  ------------
Operating activities:
  Net income                                    $     25,499  $     14,878
     Adjustments to reconcile net income to
      net cash provided by operating
      activities:
          Depreciation                                16,259        10,297
          Accretion of asset retirement
           obligation                                    295           132
          Deferred income taxes                          446            52
          Equity-based compensation                    1,289           758
          Non-cash interest expense                    4,535         7,196
     Changes in assets and liabilities:
          Accounts receivable                          1,554        (1,001)
          Prepaid expenses and other assets              234          (171)
          Accounts receivable and payable with
           Quicksilver                                (2,248)        3,435
          Accounts payable and other                   3,405           789
                                                ------------  ------------
Net cash provided by operating activities             51,268        36,365
                                                ------------  ------------

Investing activities:
  Capital expenditures                               (50,067)     (112,200)
  Assets purchased pursuant to repurchase
   obligations                                        (5,645)            -
                                                ------------  ------------
Net cash used in investing activities                (55,712)     (112,200)
                                                ------------  ------------

Financing activities:
  Proceeds from revolving credit facility
   borrowings                                         46,500        99,300
  Repayment of credit facility                       (14,500)            -
  Repayment for subordinated note payable to
   Quicksilver                                             -          (825)
  Distributions to unitholders                       (27,248)      (23,423)
  Other                                                  (63)            -
                                                ------------  ------------
Net cash provided by financing activities              4,689        75,052
                                                ------------  ------------

Net cash increase (decrease)                             245          (783)

Cash at beginning of period                              303         1,125
                                                ------------  ------------

Cash at end of period                           $        548  $        342
                                                ============  ============




                        QUICKSILVER GAS SERVICES LP
                           OPERATING STATISTICS
                                Unaudited


                                 Three Months Ended     Nine Months Ended
                                      Sept. 30,             Sept. 30,
                                --------------------- ---------------------
                                  2009       2008       2009       2008
                                ---------- ---------- ---------- ----------

Volume Data:
  Volumes gathered (MMcf)           21,523     19,591     65,572     51,269
  Volumes processed (MMcf)          13,197     14,122     41,958     40,870





                        QUICKSILVER GAS SERVICES LP
                      RECONCILIATION OF NET INCOME TO
                          DISTRIBUTABLE CASH FLOW
                         In thousands - Unaudited


                                 Three Months Ended     Nine Months Ended
                                      Sept. 30,             Sept. 30,
                                --------------------  --------------------
                                  2009       2008       2009       2008
                                ---------  ---------  ---------  ---------

Net income                      $   8,653  $   6,388  $  25,499  $  14,878
  Depreciation and accretion
   expense                          5,745      3,866     16,554     10,429
  Income tax
   provision/(payments)               235       (226)       446       (223)
  Non-cash interest expense,
   net of capitalized interest
   cost paid                        1,283      1,977      4,224      6,077
  Maintenance capital
   expenditures                    (2,500)      (473)    (7,500)    (1,418)
                                ---------  ---------  ---------  ---------
Distributable cash flow         $  13,416  $  11,532  $  39,223  $  29,743
                                =========  =========  =========  =========





                         QUICKSILVER GAS SERVICES LP
                      RECONCILIATION OF NET INCOME TO
                      ADJUSTED GROSS MARGIN and EBITDA
                                 Unaudited
                          (Amounts in thousands)



                                 Three Months Ended     Nine Months Ended
                                      Sept. 30,             Sept. 30,
                                --------------------- ---------------------
                                   2009       2008       2009       2008
                                ---------- ---------- ---------- ----------

Total revenues                  $   24,298 $   19,304 $   72,993 $   52,694
  Operations and maintenance
   expense                           5,694      4,772     17,108     15,034
  General and administrative
   expense                           1,733      1,473      5,463      4,712
                                ---------- ---------- ---------- ----------
Adjusted gross margin               16,871     13,059     50,422     32,948
  Other income                           -          4          1         10
                                ---------- ---------- ---------- ----------
EBITDA                              16,871     13,063     50,423     32,958
  Depreciation and accretion
   expense                           5,745      3,866     16,554     10,429
  Interest expense                   2,238      2,703      7,924      7,542
  Income tax provision                 235        106        446        109
                                ---------- ---------- ---------- ----------
Net income                      $    8,653 $    6,388 $   25,499 $   14,878
                                ========== ========== ========== ==========

KGS 09-12

Contact Information

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    817-665-4835